LLC Operating Agreement (template + instructions)

LLC Operating Agreement (template + instructions)


The following information is provided for
educational purposes only and in no way constitutes legal, tax, or financial advice. For legal, tax, or financial advice specific
to your business needs, we encourage you to consult with a licensed attorney and/or CPA
in your state. The following information is copyright protected. No part of this lesson may be redistributed,
copied, modified or adapted without prior written consent of the author. An Operating Agreement is an agreement between
the members of the LLC that sets forth how the LLC will be managed both financially and
operationally. Unlike your LLC Formation Documents, the Operating
Agreement does not need to be mailed in to the State. It is an “internal document”, meaning you’ll
just need to keep a copy with your business records. The purpose of an Operating Agreement is to
spell out who the members are and what percentage of the LLC they own (also known as their membership
interest). It also defines how the LLC is managed, how
taxes are paid, and how profits and losses are distributed amongst the members. You will find both the PDF and the Microsoft
Word versions below this video in the download Section. You can print these out and fill them out
by hand, or type directly in them with your computer (whatever is most convenient for
you). We will show you how to complete your Operating
Agreement regardless if you are a single-member LLC (with just 1 member) or if you are multi-member
LLC (with 2 or more members). The Operating Agreement that is provided as
a generic Operating Agreement that will work for the majority of businesses. If your business requires industry-specific
management, complex ownership agreements, has multiple investors or a large amount of
members, we recommend getting the help of an attorney. You can complete the Operating Agreement provided
as a base for your initial conversation with your attorney. This may save you time and money. If you are single-member LLC or a family-owned
LLC, this may be less of an issue for you (unless you have a crazy family)… then we
recommend you seek legal advice to prepare this document. You may need to provide a copy of your Operating
Agreement to: a lender if you are obtaining financing; a title company if you are purchasing
real estate; accounting and tax professionals for financial assistance; lawyers for legal
advice or potential investors or partners have an interest in your business. Also, if you find yourself a party to a legal
action, the court will likely ask for a copy of your LLC’s Operating Agreement. This can help document to the court that you
have a well-organized structure for handling issues that arise in relation to your LLC. One of the benefits of forming an LLC is the
flexibility of managing your business. The Operating Agreement is a working document
that is meant to be fluid and allow for changes as your business grows. If you make simple changes such as a change
of address for a member, or you change your Registered Office or Registered Agent, open
the original Operating Agreement, make the changes you need and then save the document
as a new version. For complex changes to your LLC, for example
1 member purchases the interest of another member, or you decide to raise financing with
investors, it is best to hire an attorney as this is not something we recommend you
do yourself. If changes are made, you’ll need to print
out the new Operating Agreement and have all the members sign. It is best practice to keep a copy of all
previous versions on file in order to complete your Operating Agreement. In order to complete your Operating Agreement,
you will need some basic information. It is easiest to grab a copy of your LLC Formation
Documents as it already has most of the information you will need such as: the formation date
of your LLC, the name and address of the Registered Office and Registered Agent, the general business
purpose of the LLC, the members, percentages of ownership, and the names of the members
and their addresses. We are now ready to fill out the Operating
Agreement. You can download this document below the video. Let’s get started. Here we are in the Operating Agreement. Please note that I’m using Microsoft Word
to edit this document. If you don’t have Microsoft Office, you can
use similar and free software called Open Office, or you can use Google Docs. If you prefer to just print and fill out by
hand, we’ve also included this document in PDF format. You can then open this document on your computer,
print it, and then fill it out by hand using blue or black ink. Let’s get started. In Section 1, I’m going to list the name of
the LLC, and the date in which I mailed in the LLC Formation Documents. Again, it’s easiest to reference your Formation
Documents as most of the information can be found there. I’m going to now fill out Section 1. Alright, let’s move down to Section 2. Please note in this video example, I’m going
to be filling out this Operating Agreement for a Texas LLC. This Operating Agreement will work for all
50 states, so no matter what state you’re forming your LLC in, everything for the most
part is going to be pretty much the same. You’re just going to adapt it, change it,
for your State. In Section 2 on the 1st line, I’m going to
fill in the State in which the LLC was formed, and then I’m going to write the Effective
Date. This is going to be the same date as in Paragraph
1. Let’s now go down to Section 4, where we’re
going to list the Registered Office and Registered Agent. This will either be yourself, someone you
know, or a Commercial Registered Agent. This information will be identical to the
Registered Office and Registered Agent that you have listed in your LLC Formation Documents. In this example, we hired a Commercial Registered
Agent. I’m now going to fill in Section 4. Don’t worry that in my example the address
looks a little funny. Northwest Registered Agent is an approved
Registered Agent within all 50 states, so their addresses are formatted a bit differently
than we’re used to seeing. Let’s scroll down to Number5. Number5 is where we’re going to list the business
purpose of the LLC. This can be a few words or a few sentences
that describe the purpose of the LLC. Now many people do ask those questions of
how specific they need to be, and if they mention something here, if they’re going to
be pigeonholed and forced to do that forever. No you’re not. Remember, this is a fluid document and you
can make changes, and it’s best to usually use something a little bit more generic here. This LLC is a marketing agency, so I’m going
to list that in Section 5. Under Number 6, the duration of the LLC, you’re
going to list “Perpetual”. “Perpetual” means that the LLC will be in
existence, until the members decide to close (also known as “dissolve”) the LLC. All right, let’s scroll down and go to the
next Section. We’re going to continue scrolling through
Page 1, we’re going to go to Page 2, and we’re actually going to end up at the bottom of
Page 2 underneath “Tax and Financial Provisions Number1” (the tax classification of the LLC). If you are single-member LLC, for tax purposes
the IRS is going to tax your LLC just like a Sole Proprietorship. So in this case, if you’re a single-member
LLC, we’re going to list “Sole Proprietorship”. Now, if you’re a multi-member LLC with 2 or
more members, the IRS is going to tax your LLC just like it would tax a Partnership. So if you’re multi-member LLC, you’re not
going to put the word “Sole Proprietorship”, you’re going to put “Partnership”. Let’s move forward. Here we are at the top of Page 3, Number2
(the “Tax Year and Accounting Method”). The tax year of this LLC shall be the “calendar
year”. The LLC shall use the “cash method” of accounting. And that completes Number 2. Let’s go down further. Here we are in Section 4 (“Capital Provisions”). Under Number 1, we’re going to list the date
in which all members made their contribution to the LLC. This will most likely be the date that the
LLC was formed, or that it became effective. Feel free to use the same date that you used
at the top of Page 1 under Number 1. Let’s move on and list the names, addresses,
contribution, and percentage of interest in the LLC for all the LLC’s members). For this example, this is going to be a multi-member
LLC owned by a husband and wife. If you are a single-member LLC, you’re just
going to list your name and your address, the contribution, and then under “Percent
Interest”, you’re going to put a hundred percent. In this document, we have 3 areas where you
can list the names and addresses of the LLC’s members. If you have more than 3 members feel free
to add additional lines below. For our example, I’m going to put the name
and address of a husband-and-wife-owned LLC where each member owns 50 percent interest. If you or the members of the LLC did not make an actual
cash contribution, feel free to simply lists $100. Let’s move forward. Let’s scroll down to Page 4 where we’re going
to go to Number 8 (“Allocation and Distribution of Cash”). In this blank line, you’re simply going to
put “all of the members”. Under Section 5 (“Membership, Withdrawal and
Transfer Provisions”), in this blank line you’re going to put “60” for 60 days. 60 days is the amount of days that we recommend. However, if your business needs more or less
time, this is flexible, so feel free to make those adjustments as needed. Let’s scroll down to Page 5. Underneath Section 6 (“Dissolution Provisions”),
where it says “except that within blank”, I’m going to list “60 days”. Again, this is flexible, so feel free to adjust
for your business if needed. All right, let’s move forward. We’re nearly complete with the Operating Agreement. We’re going to scroll through Page 5 and go
to Page 6, and only thing that we have left to do is list the members, sign, and date
the Operating Agreement. If you just have 1 member, you’re simply
going to put the date that you’re signing this document. After you print it out, you’ll sign on the
2nd line, and then you’re going to put your name on the 3rd line. Again for this example, this is a multi-member
husband-and-wife LLC, so I’m going fill out this Section real quick. So in my example, I’ve listed “1/1/2014, wrote
“John Doe”, and the same thing on Page 7 (“1/1/2014 and Mary Doe”). All they would need to do is simply print
this document, and sign on both of those lines. In this sample document, we have 3 areas for
members. If you’re not using any signature blocks,
feel free to just simply put an “X” through them if you’re filling this document out by
hand, or if you’re on the computer you can simply highlight and delete them. Also, if you have more than 3 members, feel
free to add additional lines and signature blocks below. Please note: the LLC Operating Agreement does
not need to be notarized. You’ll simply print out the document, have
all members sign, and then you’ll just keep a copy with your business records. And this completes the LLC Operating Agreement.

92 thoughts on “LLC Operating Agreement (template + instructions)

  1. One other question. My other two members are not sure to what capacity they will be involved. Since this document doesn't need to be submitted can we get the LLC registered so we don't lose the name and then draft up this document at a later date. Basically I want to get this done right away and the other two members at this point are not sure if they want to be "members" or not.

    Is it easy in Colorado to add members later or should I just wait to get confirmation from them?

  2. Thanks so much for your guidance. I'd like to thank you for making this so simple for those of us that struggle with heavy wording.

  3. If the LLC is going to be filed with the IRS as an S corp, do I still need to insert sole proprietorship?I am in Wisconsin.

  4. Is an LLC legitimate if there is no operating agreement OR will the LLC be recognized in court without an operating agreement

  5. You saved me over $1000. I went to open a business account and operating agreement was one of the requirements. I am very fortunate to have come across your channel and may God bless your endevours as you continue to be of service to others.

  6. is it legal to put a statement in your distribution area that no other entity can decide distributions only members of the LLC

  7. Can we open an LLC in nevada to avoid the high taxes in California?
    I am planning to invest in real state.
    thanks for video.

  8. For section 4, if i did not hire an agent do i leave that section blank, or do i just type in my name and my address?

  9. Hello Matt,

    I was supposed to start my LLC a few months ago but got a
    bit sidelined with some issues. Anyways, starting to refocus and got a few
    questions.
    1)     
    When listing Name and Address for the “Capital
    Contributions by Members” section, what address would it have to be home
    address or business address? Can it be either one of them?
    2)     
    For the portion
    written: “(6) Consent to Capital Contribution Withdrawals and Distributions:
    Members shall not be allowed to withdraw any part of their capital contributions or to
    receive distributions, whether in property or cash, except as otherwise allowed
    by this agreement and, in any case, only if such withdrawal is made with the
    written consent of all members.”
    Does the bolded statement indicate that every time a member has to withdraw money
    from the business bank account, as a member distribution, a written consent
    must be recorded?
    Thanks for the help!
    Jack

  10. Your video is a life saver. It translates a daunting task to a simple procedures to follow. I'm little unsure about the date to fill in the OA form. If the LLC is formed in the middle of the year, do I fill in the exact date of the LLC formation for all the dates space and still use the calendar year for Tax Year and Accounting Method?

  11. Hey I have a question I just form my llc not to long ago but I haven't done my ein number by the irs or a operating agreement because me and my father are both owners which one should I go by first or does it matter should I get my ein please help

  12. if we want to be tax as a S Corp how would we go and file a Form 8832? what do we put down in the section where you put "sole-proprietor/partnership"?

  13. Thank you so much sharing all the information. Do you have an operating template that manager managed LLC? I do want to limit certain members power in decisions when there will be some disagreement in the future. I feel manager managed LLC will be the way that I want to go. Really appreciate your time and help.

  14. I enjoyed your video it was very helpful. If I started off as a sole proprietor with a DBA and plan to still use the DBA to form my LLC what date would I enter on the operating agreement? Would it still be the date the LLC was approved by the Secretary of State. When you enter the money contributed to the LLC and it's the same money earned as a sole prop. do I enter that amount or $100?

  15. I'd like to start my own LLC, but how does one go about registering it with the state if the two members live in different states? We are only going to sell online intellectual property though.

    Also, would an attorney need to look over this agreement?

  16. Hey Matt! loved the video, it really helped me out. I know in the beginning that you said the following content was copyrighted but does that include the links to the template? I'd like to use it!

  17. Great info Sir, and thank you in advance.  On page 2 the Tax classification, you mention sole proprietorship.  In a single member LLC could I use "disregarded entity" for this?  Or is there a reason I need to use sole proprietorship.  When I obtained my EIN it was the default with only one member.  Thks again in advance very well done.

  18. All your videos are very helpful I get a lot from your videos truly you are very generous person .God bless your Knowledge.

  19. Thanks so much for all the helpful information! Question… Can someone select the "accrual" method of accounting instead of "cash?" If so, what are the benefits of using the "cash" method vs. "accrual" for accounting treatment?

  20. I started my business 1 month ago (September) started getting my first sales this month (October) and am thinking about opening a business bank account to store the money I've made. Should I wait 2 months until January to file to avoid back-to-back taxes?

    If I do wait until January, where should I put my money and how should I keep track of money coming in and going out? I need to purchase supplies, import goods, pay to advertise, hire freelancers. Do i transfer the money currently sitting in my Stripe account to my personal bank account, and then pay the bills with my personal card?

    Thanks for the help with this.

  21. Am thinking of making real estate LLC in Virginia, me/wife & mum/dad 4 people in total. What would happen in case someone dies, who can claim or if my parent die, what would happen to his/her share. How can I inherit it etc, my parents don't live here & are not US citizens, but they are the capital provider from abroad. What will happen to there taxes in USA.

  22. This was most helpful. I appreciate your time and effort for sharing this important information and making this a smooth process. Thank you

  23. Hi, Good one from you. Just a simple question on LLC share capital allocation and profit sharing. I need an advise. I have a LLC with three members; Mr. A, B & Ms C.
    Mr. A is myself the business owner, who works as a consultant for an Oil & Gas Company, which means he goes offshore and can only work in the LLC for 6mnths or less in a year. Mr. B is not expected to work on daily basis in the company for now, he supports the LLC with little funding, Secure Bank Facilities & business contacts. While Ms. C is expected to run the LLC on daily basis. She also expects a monthly stipend. Whats the best share capital structure for this LLC?

  24. Hi, is this form free for me to download and use for my LLC? Also, under Section 3 – Tax and Financial Provision, Sub 1, if I have 4 members/partners, would I still put sole proprietorship? Also, can you explain why? Thank you.

  25. Thanks for the very helpful information. I have one question, my wife started her Life and Health Insurance business a couple of years ago. She did not establish an LLC at that time, we are now in the process of doing so now. Should we state the start date on the Operating Agreement?

  26. If I have a sole proprietors business and I want to open a different kind of business can I use the same EIN, seller's permit Number for both businesses? I want to make both LLC.

  27. New subbie here! Your videos are very informative! Thanks so much for making this seemingly difficult and tedious task, plain and simple! 😊

  28. I have real property, stocks and cash that was left to me in a inheritance. I am using this to start and investment LLC to manage rental property, buy more properties and stocks in the future and make other investments what ever they may be. I would like to know how or should the property, stocks and cash be listed when filling out contributions.

  29. Hey folks, make sure to check the site for most up-to-date information: https://www.llcuniversity.com/operating-agreement/. Or select your state and start forming your LLC with our free guides: https://www.llcuniversity.com/

  30. Hey,
    If I followed the tips for saving money on Newspaper ads, which fields do the address of the registered agent go in? When I remove the registered agent to change back to my address, which fields do I change? Must I resubmit this document?

  31. 1. I want to establish an LLC in my state of Ohio, and my partner is in New York. Do we need to do anything different when setting the LLC up?
    2. Will we each still be able to pay our "passed through" taxes to our respective states on our personal return or does this complicate his tax situation?
    3. We don't have a physical business address yet, and don't want to use our personal address. Will a commercial mail service address work for setting up the LLC?

    Thanks so much for the help!

  32. Hello I'm forming a single member LLC.

    1. I'm doing an Operating Agreement before I actually have a location. Should I wait?

    2. YOU'RE AWESOME!

  33. Under section 4 "Capital Provisions" subsection 1 "Capital Contributions by Member", how would you recommend detailing the contribution of each member for a residential real estate investment and rental company in the state of Texas? There are 4 members and the members will contribute equally 25% of each home purchase. This $$ amount will change often with each home purchase and/or sale. Is there a way to state this more generally without having to write down a specific $ amount?

  34. What if you have a single member LLC and want to add people ? Can i just add it myself ? How do i go about that ?

  35. Thank you so much for such well made and helpful videos, straight to the point and clear to allow, thank you!

  36. Yes you rock for this man! Thank you for sharing this knowledge. I'm so happy to see its helped me and so many other ambitious people out there. Hey y'all! Sending positive energy out to you all. 🙂

  37. I've been using my North West Registered Agents' address for my business and I'm wondering can it be utilized under 'IV: Capital Provisions' instead of a personal address?

  38. Hi I have some question?
    1 – Can have two activities with different names under one LLC company? I mean i will setup a LLC company and I will sales two different services with two different name.
    2 – while i am setting up the LLC, can a member of the group be outside USA? Is it possible?
    3 – The members monthly income or salaries can be a percentage of the benefits? How do we set it up?
    Thanks , I tried to get your email address but I couldn't find it.
    Yawu
    [email protected]

  39. With starting business, I need to fill out LLC first, then EIN correct? when would i get my business name patted and license necessary for starting business? all before LLC & EIN

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